tax administration: few state and local governments publicly

TAXADMINISTRATION

Few State and LocalGovernments PubliclyDisclose DelinquentTaxpayers

United States General Accounting Office

GAO Report to the Joint Committee onTaxation

August 1999

GAO/GGD-99-165

United States General Accounting Office General Government Division

Washington, D.C. 20548

Page 1 GAO/GGD-99-165 Public Disclosure of Delinquent Taxpayers

B-282522

August 24, 1999

The Honorable Bill ArcherChairmanThe Honorable William V. Roth, Jr.Vice ChairmanJoint Committee on Taxation

The Internal Revenue Service Restructuring and Reform Act of 1998required the Joint Committee on Taxation to study whether greater levelsof compliance might be achieved by publicly disclosing taxpayers whohave not filed their required federal tax returns. This report provides theinformation about state and local public disclosure programs that yourequested to assist you in your study. Specifically, our objectives were todetermine (1) which state and local governments are operating programsto publicly disclose the names of taxpayers that are delinquent in payingthe income taxes they owe or do not file income tax returns, (2) thedifferences, if any, among these programs, and (3) state and local revenueoffice officials’ views on whether their disclosure programs are improvingcompliance. Because of your interest in the individual programs, we arealso providing a description of those programs that we identified inappendix I.

Consistent with your request, in this report we define public disclosure asa process for proactively publicizing the names and other identifyinginformation about taxpayers that are delinquent or do not file returns.1

Such programs represent a departure from historical practice. Asdescribed later in this report, federal and state confidentiality statutesgenerally prohibit the disclosure of taxpayer information.

Of the state and local governments we surveyed, only four states—Connecticut, Illinois, Montana, and New Jersey—and the District ofColumbia are operating programs to publicly disclose the names and otherinformation about individuals or businesses that are delinquent in payingincome taxes. None of the programs include specific provisions fordisclosing the names of taxpayers that simply fail to file their required taxreturns. Instead, compliance employees are to assess taxes owed bynonfilers they have identified and then process nonfiler accounts in the

1As such, these proactive programs can be distinguished from other disclosures, such as a public noticepursuant to a legal action (e.g., when a lien is placed on a taxpayer’s property).

Results in Brief

B-282522


same manner as other taxpayers’ accounts. In the event that such nonfilersare found to be delinquent, they also become subject to public disclosure.

The five public disclosure programs differ in regard to their legal authorityand operations. Like the federal government, the four states and theDistrict of Columbia have tax provisions that protect the confidentiality oftaxpayer information. Two states—Connecticut and Illinois—and theDistrict have enacted legislation providing explicit statutory authority fortheir programs, notwithstanding confidentiality safeguards. The two otherstates—Montana and New Jersey—have not. Officials from these twostates said that they do not need additional statutory authority toimplement public disclosure because a tax delinquency is a matter ofpublic record after certain legal action has been taken, such as filing acertification of debt in superior court, which is entered into a judgmentdocket. The programs also operate differently, varying as to theprocedures leading up to disclosure, the media through which disclosure ismade, the type of information disclosed, and how often that information isupdated.

Revenue office officials from the four states and the District of Columbiabelieve that their programs have improved or will improve compliance.However, officials are unable to isolate the gain in revenue collectionsdirectly attributable to their programs. As they explained, public disclosureis one of many tools that revenue offices use to gain compliance. Somerevenue office officials also noted that factors outside the control of theiroffices—notably, the economy—affect compliance.

Like the Internal Revenue Service, state and local revenue offices haveauthority to collect taxes from taxpayers that they believe have not paidthe taxes they owe, including taxpayers that are delinquent or have notfiled their returns. The collection process followed by most revenue officesis phased and generally begins with an assessment of taxes owed.Thereafter, the office has a number of collection tools it can use to obtaincompliance, including mailing notices to inform the taxpayer of the taxesthat have been assessed and the procedures available for resolving thedelinquency.

In the case of taxpayers that do not respond, the revenue office also hasother tools at its disposal. These include telephone calls and in-personvisits, the placement of a lien on the taxpayer’s property, levying thetaxpayer’s bank accounts, and ultimately the seizure and sale of thetaxpayer’s property. To resolve delinquencies not resolved usingtraditional collection tools, revenue offices have experimented with other

Background

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less traditional tools, including public disclosure programs as defined inthis report.

To accomplish our three objectives, we used a combination of surveys andinterviews with state and local revenue office officials. Initially, todetermine which state and local governments are operating publicdisclosure programs, we developed a short survey and sent it to all 50states. We asked officials from revenue offices in each state whether theyhad such a program or knew of any local governments operating adisclosure program in their state. Because these officials identified nolocal governments with public disclosure programs, we used the 1998 StateTax Guide to identify cities and counties that had a local personal orcorporate income tax, and thus potentially might be operating a program.

As agreed with the Committee, we used this information to select no morethan five cities and five counties per state, using population size—startingwith the largest—as our criterion. The group included 24 cities and 8counties in 12 states and the District of Columbia.2

Appendix II provides a list of the cities and counties we surveyed. We thensent surveys, which were virtually identical to the ones sent to states, tothese governments. The response rate for surveys of states, cities, andcounties was 100 percent.

To determine the differences among the programs and the views of stateand local officials on whether the programs are improving compliance, weconducted structured interviews by phone or in-person with officials fromrevenue offices in the jurisdictions that reported having public disclosureprograms. To provide the most complete information possible, we alsointerviewed officials from jurisdictions reporting that they haddiscontinued or were planning to adopt a program.

We did not verify the survey responses provided by the state and localrevenue offices. The results of our survey of cities and counties may not berepresentative because we used a judgmental sample, focusing on thelargest cities and counties. Also, as requested by the committee, we are notmaking any recommendations in this report.

2We eliminated cities and counties, such as Baltimore, Maryland, that had a piggyback tax, i.e., incometax collected by the state and distributed to local governments. We also eliminated cities and countiesthat have authority to levy an income tax but did not, including cities and counties in Arkansas,Georgia, and Virginia.

Scope andMethodology

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We requested and received comments on the descriptions of each stateand the District of Columbia’s disclosure program from cognizant revenueoffice officials, and we incorporated their comments where appropriate.

We did our review from March 1999 to July 1999 in accordance withgenerally accepted government auditing standards.

As of June 1999, only four states—Connecticut, Illinois, Montana, and NewJersey—and the District of Columbia had programs operating to publiclydisclose the names and other information about individuals or businessesthat were delinquent in paying income taxes. All of the programs arerelatively new. Connecticut’s program, the first to be implemented, begandisclosing on the Internet in January 1997. The District of Columbia,Montana, New Jersey, and Illinois programs began disclosing on theInternet in October 1997,April 1998, May 1999, and September 1999,respectively.3 None of the other state and local governments we surveyedhad a public disclosure program.

None of the programs publicly disclose the names of taxpayers that fail tofile their required tax returns. Instead, revenue office employees assessnonfilers the taxes they owe and process their accounts in the samemanner as delinquent taxpayers should the nonfilers be determined to owetaxes. Generally, revenue office employees in the four states and theDistrict of Columbia compare federal and state income tax returns toidentify individuals that did not file their state income tax return. Identifiedindividuals are then to be assessed an estimated amount and notifiedthrough traditional billing and collections procedures. Should theindividual then fail to pay or resolve the assessment, the account is to beprocessed in the same manner as a delinquent taxpayer’s account, whichultimately may include public disclosure.

In response to our survey, officials from Wisconsin and Minnesotareported that public disclosure programs were either being developed orconsidered. All of the states and the District of Columbia that have or areplanning programs told us that they used Connecticut’s program as a

3The dates shown are when the governments began or planned to begin using the Internet or pressreleases to proactively disclose the names of delinquent taxpayers. Connecticut had begun preparing alist of delinquent taxpayers beginning in September 1996, which was open for public inspection at therevenue office.

Public DisclosurePrograms Are in FourStates and the Districtof Columbia

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model. Also, Connecticut’s tax commissioner told us that 24 other statesand five cities had requested information about the state’s program.4

Officials from North Dakota reported that in September 1995, the state’sDepartment of Revenue published a list of approximately 4,000 taxpayerswith unsatisfied liens dating back to 1982. However, they said that thiseffort was discontinued in January 1997 because of publicity about itsmany errors, such as including taxpayers that had resolved their liens.Also, North Dakota’s newly elected commissioner told us he believed thatthe disclosure unnecessarily embarrassed taxpayers.

Three of the programs we identified are operating under explicit statutoryauthority, and two are not. Connecticut, Illinois and the District ofColumbia have statutes that explicitly authorize public disclosure ofdelinquent taxpayers. Connecticut’s statute requires tax officials tomaintain, and make available for public inspection, a list of delinquenttaxpayers. Illinois’ statute explicitly states that tax officials may disclosetaxpayers that are delinquent in the payment of tax liabilities. Similarly, theDistrict of Columbia’s statute grants authority for tax officials to publiclydisclose delinquent taxpayers.

New Jersey and Montana do not operate their programs under specificstatutory authority. Like the other three jurisdictions, New Jersey andMontana have statutes designed to safeguard the confidentiality oftaxpayer information.

For example, New Jersey’s confidentiality statute explicitly provides thattaxpayer records and files shall be confidential and may not be disclosed.However, according to state officials, another provision allows tax officialsto file a certificate of debt in superior court against a taxpayer, which isentered into the judgment docket, thereby making the delinquency amatter of public record. Since the certificate of debt is a public record,revenue office officials said that they have the necessary authority topublicly disclose the information included therein with regard todelinquent taxpayers.

Montana’s confidentiality statutes also prohibit the disclosure of taxpayerinformation. Montana officials told us that another provision provides thatafter a warrant is filed with the clerk of the district court and included in 4These states were Arizona, California, Colorado, Florida, Georgia, Idaho, Indiana, Louisiana, Michigan,Nebraska, Nevada, New Mexico, North Carolina, Oklahoma, Oregon, Pennsylvania, Rhode Island,South Carolina, South Dakota, Utah, Virginia, Washington, West Virginia, and Wyoming. The cities wereBirmingham, AL; Boston, MA; Juneau, AK; Milwaukee, WI; and New York, NY.

Programs’ LegalAuthority andOperations Differ

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the judgment docket, the information becomes a matter of public recordand subject to public disclosure on the Internet, newspapers, or any othermedium the state may choose.

The programs also operate differently. As shown in table 1, they differ withrespect to the procedures leading up to disclosure, the media throughwhich the disclosure is made, the type of information disclosed, and thefrequency with which information is updated.

As table I also shows, four of the programs include provisions to sendletters to delinquent taxpayers, warning them of impending disclosure ifthey do not resolve their delinquency.5 Additionally, the length of time torespond to the warning varies from 10 business days to 60 calendar days;all 5 governments use the Internet, while 3 also use press releases todisclose delinquent taxpayers; the number of taxpayers listed varies from50 to all that qualify, and the frequency of updates varies from monthly toperiodically, as new information becomes available.

Programs

Program procedure ConnecticutDistrict ofColumbia Illinois Montana New Jersey

Warning letter of impending disclosure sent Yes Yes Yes No YesDays for taxpayers to respond to warning 10 (business) 30 (calendar) 60 (calendar) Not applicable 14 (business)Medium of disclosure Internet, press

release andnewspaper

Internet Internet andpress release

Internet andpress release

Internet

Number of taxpayers disclosed on delinquency list 100 All that qualify All that qualify 50 200Disclosure of mailing address Yes No Yes No NoDisclosure of court docket number No No No No YesDisclosure of type of tax Yes No Yes Yes NoDisclosure of year(s) of tax liability No No Yes No YesFrequency of update of delinquency list Monthly Periodically Periodically Monthly Monthly

Source: GAO surveys and structured interviews of state and local revenue office officials.

5The programs provide that taxpayers can resolve their delinquencies by paying in full or negotiatingpayment agreements. Taxpayers may also provide evidence that the liability is an error or demonstratethat bankruptcy procedures are in process.

Table 1: Differences in Program Operations

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Revenue office officials believe that their public disclosure programsimprove compliance. They base their views mostly on anecdotal evidencefrom statistics on accounts receivable and collections. Montana reportedthat as of June 1999, numerous accounts receivable had been resolvedsince the program’s inception in April 1998. Specifically, Montana said that18 payment plans had been set up, 23 accounts had been paid in full, and23 taxpayers had filed their returns. During this time, approximately 150taxpayers had been disclosed on the Internet. The District of Columbiareported that as of June 1999, it had collected $669,912 from seventaxpayers after they had received warning letters that their names wouldbe disclosed on the Internet. As of June 1999, approximately 150 warningletters had been sent to delinquent taxpayers. Additionally, revenue officeofficials from Connecticut and the District of Columbia added that theybelieve public disclosure had a salutary effect on voluntary compliance.

However, the state and District revenue office officials recognized thatsuch statistics were not good indicators of program impact because theydo not isolate the effect of public disclosure on accounts receivable andcollections. As they explained, public disclosure is one of many tools thatrevenue offices use to gain compliance. For example, Montana officialsnoted that at about the same time the first list of delinquent taxpayers waspublished on the Internet, the state implemented an automatic phonesystem (the predictive dialer), which enabled collectors to contact asignificantly greater number of taxpayers than they were previously able tocontact. The collectors were able to contact more taxpayers because theautomated phone system makes multiple calls, screening out nonreponses,busy signals, and answering machines, and then directs calls that areanswered by the taxpayer to available collectors.

While District of Columbia officials were able to identify payments fromtaxpayers that had been warned that their names would be published onthe Internet if they did not resolve their tax liabilities, they recognized thatother factors could have influenced the taxpayers’ decision to pay.

None of the revenue offices had undertaken a thorough evaluation of theirprogram. Such an evaluation would be expensive and, as our prior workhas shown, isolating the impact of such programs would be difficult.6

Moreover, revenue office officials from New Jersey and Connecticut saidthat factors outside of tax administration—notably, the economy—alsoaffect compliance.

6Budget Process: Issues Concerning the 1990 Reconciliation Act (GAO/AIMD-95-3, Oct. 1994).

Revenue OfficeOfficials Believe TheirPublic DisclosurePrograms ImproveCompliance

http://www.gao.gov/cgi-bin/getrpt?AIMD-95-3

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We are sending copies of this report to Representative Charles B. Rangel,Ranking Minority Member, Joint Committee on Taxation, and SenatorDaniel P. Moynihan, Ranking Minority Member, Senate Committee onFinance. We are also sending copies to the Honorable Lawrence H.Summers, Secretary of the Treasury; the Honorable Charles O. Rossotti,Commissioner of Internal Revenue; and the Honorable Jacob Lew,Director, Office of Management and Budget; and other interested parties.We will also send copies to those who request them.

If you or your staff have any questions concerning this report, pleasecontact me at (202) 512-9110 or A. Carl Harris, Assistant Director, at (404)679-1900. Other major contributors to this report are acknowledged inappendix III.

Margaret T. WrightsonAssociate Director, Tax Policy and

Administration Issues

GAO/GGD-99-165 Public Disclosure of Delinquent Taxpayers


Contents

1Letter

12Connecticut 12District of Columbia 13Illinois 15Montana 16New Jersey 18

Appendix IProfiles of State andLocal GovernmentsWith Public DisclosurePrograms

20Appendix IICities and Counties WeSurveyed

21Appendix IIIGAO Contacts andStaffAcknowledgments

Table 1: Differences in Program Operations 6Tables

Appendix I

Profiles of State and Local Governments WithPublic Disclosure Programs


In this appendix, we describe each of the five public disclosure programs.All the information provided in this appendix was reported by state andlocal revenue office officials. Other than clarifying this information withthe appropriate officials, we did not attempt to validate its accuracy.

In January 1997, the Connecticut Department of Revenue Services beganpublicly disclosing on the Internet (http://www.state.ct.us/drs/delinq/mart100.html), newspapers, and press releases, the names of Connecticut’stop 100 delinquent taxpayers, including businesses and individuals.

In 1986, section 12-7a of the Connecticut Tax Code was amended torequire the tax commissioner to prepare a list of delinquent taxpayers andmake it available for public inspection.

Revenue office officials told us that the public disclosure program wasinitiated as a means of applying “social” pressure to encourage people topay the taxes they owe.

Certified letters, return receipt requested, are sent each month to the top200 delinquent taxpayers (those with the largest accounts that weredelinquent for more than 90 days), warning them of impending disclosureon the Internet if they do not resolve their delinquencies within 10business days. Meanwhile, officials screen the list for taxpayers whosenames should not be published.1 When 10 days have elapsed, officials have5 days to finalize and narrow the list to the top 100. The informationdisclosed includes the taxpayer’s name, address, amount owed (includingpenalties and interest), and type of tax owed. It is updated monthly.

Disclosure is discontinued for any of the following reasons:

• taxpayer pays, negotiates a payment agreement, or otherwise resolves theaccount;

• taxpayer’s account has appeared on the Web site for 3 or more consecutivemonths, and the revenue office has verified that:

• certified letters have been undeliverable for 3 consecutive months,but not “refused” by the addressee or

• the account is not collectible for statutory or regulation-basedreasons; or

1Officials screen taxpayers’ names for those who may have voluntarily paid or are in the process ofresolving their delinquency, yet such transactions are not yet in the computer system.

Connecticut

Legal Authority

Impetus

Operating Procedures

Appendix I

Profiles of State and Local Governments With Public Disclosure Programs


• taxpayer’s account has appeared on the Web site for 4-6 consecutivemonths, and revenue officials have verified that bankruptcy proceedingshave occurred.

Nonfilers can be included on the list after an assessment is made and theaccount becomes delinquent. Their accounts are then processed in thesame manner as other delinquent accounts and are not identified asnonfilers.

Revenue office officials reported that they have not had any inaccuratedisclosures, complaints from taxpayers, or opposition from taxpayers orinterest groups.

Revenue office officials told us that since the program’s inception, therevenue office had collected $52 million in overdue tax revenues andentered payment agreements totaling $12 million. Revenue office officialssaid that they could not determine the extent to which public disclosureaffected collections because other collection tools could have influencedtaxpayers’ decisions to pay. Revenue office officials also stated that factorsoutside the control of their offices, such as the economy, also affectcompliance.

Revenue office officials reported that they use several tools to gaincompliance, such as letters, liens, levies, and seizures. Additionally,Connecticut has used other tools, such as a Tax Amnesty Program, aVoluntary Disclosure Program, and the Nexus Project.2

In October 1997, the District of Columbia’s Office of Tax and Revenuebegan publicly disclosing on the Internet (http://www.dccfo.com/TAXPAYER2.htm) the names of selected uncooperative delinquenttaxpayers, including businesses and individuals, who owe more than$10,000.3

In 1947, section 47-1805.4 of the District of Columbia Code was enacted,granting the District authority to disclose delinquent taxpayers.

2The Tax Amnesty Program allowed nonfilers to come forth and pay their taxes without penalty. TheVoluntary Disclosure Project offers noncompliant taxpayers favorable terms to pay their back taxes.The Nexus Project is an effort to identify and collect the taxes owed by nonresident taxpayers.

3In May 1999, 94 taxpayers were listed. This represented all delinquent taxpayers that had beenprocessed to disclosure. The list included two taxpayers who owed less than $10,000, $9,743.48 and$9,749.69, respectively.

Problems/Complaints

Effect on Compliance

Other Tools for ImprovingCompliance

District of Columbia

Legal Authority

Appendix I



Revenue office officials told us that the public disclosure program wasinitiated as another tool to encourage taxpayers to pay the taxes they owe.They also told us that they were impressed with Connecticut’s publicdisclosure program.

When an account is delinquent for at least 90 days, a certified letter is sent,warning the taxpayer that failure to work with the Office of Tax andRevenue within 30 days to resolve the delinquency could result in publicdisclosure. After the disclosure, a copy of the Internet screen is mailed tothe delinquent taxpayer. The information disclosed includes the taxpayer’sname (including the responsible officer(s) for businesses) and the amountowed. The delinquency list is updated periodically as new informationbecomes available.

Disclosure is not made (or discontinued if already made) for any of thefollowing reasons:

• taxpayer makes payment arrangements,• revenue office determines that a mistake was made in calculating the tax,• taxpayer enters bankruptcy proceedings, or• taxpayer provides evidence that he is not the responsible officer of a

business.

Nonfilers can be included on the list after an assessment is made and theiraccounts become delinquent. Their accounts are then processed in thesame manner as other delinquent accounts and are not identified asnonfilers.

Additionally, the Office of Tax and Revenue publishes a separate list on theInternet of taxpayers it is unable to locate after exhaustive investigation.The public is invited to advise the Office of Tax and Revenue of thewhereabouts of these taxpayers.

Revenue office officials told us that they have not conducted an overallevaluation of their disclosure program because of staff limitations. Theytold us that in fiscal year 1999,4 the revenue office collected $669,912 aftersending warning letters and $70,587 after disclosure on the Internet.However, revenue office officials recognized that other factors could haveinfluenced the taxpayers’ decisions to pay.

4As of June 1999.

Impetus



Appendix I



Revenue office officials reported that they were aware of only one instancewhere inaccurate information was disclosed on their Web site. In this case,an individual was inappropriately identified as the responsible officer of abusiness. After providing information proving that he was not theresponsible officer, the revenue office corrected the mistake. Officials saidthat they had not received any complaints about the public disclosureprogram or any opposition from interest groups.

The disclosure program is one of many tools the District uses to improvecompliance and collect unpaid taxes. Other tools include telephonecontacts, letters, liens, and seizures.

In September 1999, the Illinois Department of Revenue plans to disclose onthe Internet (http://www.revenue.state.il.us/) and through press releases,the names of all delinquent taxpayers, including businesses andindividuals, who have final liabilities greater than $10,000 for longer than aperiod of 6 months.

Section 39b54 of the Illinois Civil Administration Code, enacted in August1998, with an effective date of January 1999, provides Illinois’ authority forits public disclosure program.

Revenue office officials told us that the public disclosure program wasinitiated to decrease the amount of accounts receivable. The revenueoffice was also influenced by Connecticut’s public disclosure program.

Certified letters are sent to those taxpayers with delinquent accounts of atleast 6 months, warning them that their names will be published on theInternet if they do not make payment arrangements or resolve theiraccounts. Taxpayers have 60 days to respond. The information to bedisclosed includes the taxpayer’s name; amount owed; mailing address;type of tax owed; tax period; and for corporations, the president’s name.While the legislation stipulates an annual list, the program administratorsaid that names will be removed periodically, as accounts are paid, andthat new names will be placed on the list only once a year.

Disclosure may be discontinued for any of the following reasons:

• account is paid in full,• payment arrangements are made,• old payment agreements are brought into compliance, or• legal proceedings (i.e., administrative hearings, civil court, or bankruptcy)

are under way.

Problems/Complaints


Illinois

Legal Authority

Impetus


Appendix I




Revenue office officials told us that it is too early to determine the fullimpact of the program. However, they reported that after sending warningletters to 5,200 delinquent taxpayers since March 1999, $2.9 million hadbeen collected, $918,000 in payment agreements had been made, and$453,000 in accounts receivable were resolved (i.e., the taxpayerdemonstrated that amount was not owed).5

Revenue office officials reported that they have not had any oppositionfrom interest groups. They have received some letters of complaint frombusinesses with the same or similar names as delinquent taxpayers.

Revenue office officials reported that they use other tools to gaincompliance, such as letters, liens, levies, and seizures. Other tools includedenying the issuance or renewal of licenses and utilizing private collectionagencies.

In April 1998, the Montana Department of Revenue began publiclydisclosing on the Internet (http://www.state.mt.us/revenue/del._tax_accts.html) and through press releases, the names of Montana’s top 50delinquent taxpayer accounts, including businesses and individuals.

Montana does not have a statute that specifically addresses publicdisclosure. However, according to Montana officials, section 15-1-704 ofMontana’s Tax Code allows the department of revenue to file a warrantwith the district court to be included in the judgment docket, which makesthe delinquency a matter of public record.

The public disclosure program was initiated in an effort to improvecompliance. Also, revenue office officials told us that they were impressedby Connecticut’s public disclosure program.

If taxpayers do not pay their taxes within 30 days of the due date, theDepartment of Revenue notifies the delinquent taxpayer, either bytelephone or mail, that unless payment is received within 30 days of thedate of the notice, a warrant of distraint may be issued and filed in thedistrict court. The filing of warrants with the clerk of the district court to 5As of May 21, 1999.


Problems/Complaints


Montana

Legal Authority

Impetus


Appendix I



be included in its judgment docket is the basis of Montana’s disclosureprogram; as such, legal action renders a delinquency a matter of publicrecord. The information disclosed includes the taxpayer’s name, city andstate of residence, tax type, and amount owed. The information is to beupdated monthly.6

Public disclosure is discontinued for any of the following reasons:

• payment plan is established,• return is filed,• revenue office accepts an offer-in-compromise,• taxpayer files for bankruptcy, or• taxpayer is on the list for 6 months.


Since the program’s inception, revenue office officials reported that as ofJune 1999,

• 23 taxpayers paid in full,• 18 negotiated payment plans,• 23 filed outstanding returns, and• 2 filed amended returns.

The revenue office officials told us that they had collected $367,839 as aresult of these actions. They recognized that other factors may havecontributed to the taxpayers’ decisions to pay or resolve theirdelinquencies. For example, Montana officials noted that at about thesame time the first list of delinquent taxpayers was published on theInternet, the state implemented an automatic phone system (the predictivedialer), which enabled collectors to contact a significantly greater numberof taxpayers.

Revenue office officials stated that in one instance, inaccurate informationwas disclosed on the Internet. In that case, the amount of taxes owed wasoverstated because the tax rate was applied incorrectly. The state hasreceived few complaints from taxpayers and no opposition from interest 6The March 1999 listing had not been updated as of July 15, 1999. According to the programadministrator, failure to update the Internet listing was an oversight.


Problems/Complaints

Appendix I



groups. One local attorney tried to organize citizens in opposition to theInternet program, but he was unable to gain much support, according torevenue office officials.

Revenue office officials reported that they use other tools to gaincompliance, including telephone contacts, letters, warrants of distraint(liens), levies, and offers-in-compromise.

In May 1999, the New Jersey Division of Taxation began publicly disclosingon the Internet (http://www.state.nj.us/treasury/taxation/jdgdiscl.htm), thenames of New Jersey’s 100 businesses and 100 individuals that owe themost.

New Jersey does not have a provision that expressly authorizes a publicdisclosure program. According to New Jersey officials, the filing of acertificate of debt under section 54:49-12 forms the basis of New Jersey’spublic disclosure program. When the clerk files the certificate in thejudgment docket, the information contained therein becomes publicrecord.

Revenue office officials told us that the public disclosure program wasinitiated in an effort to collect outstanding tax liabilities. Also, they wereinfluenced by the reported success of Connecticut’s public disclosureprogram.

The public disclosure program is not initiated until after standardcollection tools are used, including sending the taxpayers a statement ofaccount, bill, notice of assessment, and a letter warning that failure toresolve their delinquency in 30 or 90 days7 will result in the filing of acertificate of debt. After the certificate of debt is filed, taxpayers may besubject to actions, such as levy, seizure, and/or referral to the AttorneyGeneral. Finally, delinquent taxpayers are warned, through certified mail,that failure to resolve their delinquency within 14 days may result in thedisclosure of their certificate of debt information on the Internet. The 100individuals and 100 businesses that owe the most are disclosed. Theinformation disclosed includes the taxpayer’s name; trade name (if abusiness); city; date and amount of the certificate of debt; and the courtdocket number. The information is updated monthly.

7Businesses are given 30 days, while individuals are given 90.


New Jersey

Legal Authority

Impetus


Appendix I



Disclosure is discontinued if the taxpayer

• shows proof of bankruptcy proceedings,• enters into a deferred payment arrangement or closing agreement, or• pays all tax liabilities.

Also, taxpayers that have not paid outstanding liabilities or entered into adeferred payment arrangement or closing agreement may be removed tomake room for the posting of new names. Such taxpayers may be re-posted at any time until the delinquencies are resolved.

Nonfilers can be included on the list after an estimated assessment is madeand a certificate of debt is filed. Their accounts are then processed in thesame manner as other delinquent accounts and are not identified asnonfilers.

A revenue office official told us $695,991 had been collected as of July 27,1999. However, he also stated that it is too soon to quantify the full effectsof the program.

Officials reported that they had received no complaints from taxpayers oropposition from interest groups.

Revenue office officials told us that the disclosure program is only one ofmany tools the state uses to improve compliance and collect unpaid taxes.Other tools include project letters, field investigations, certificates of debt,levies, seizures, and office and field audit programs. The revenue office hasalso used private collection agencies and a special project group thatfocuses upon noncompliants in the cash economy, as less traditional tools.


Problems/Complaints


Appendix II

Cities and Counties We Surveyed


State City CountyAlabama Birmingham

Los AngelesCaliforniaSan FranciscoDistrict of Columbia

Delaware WilmingtonAllenElkhartMarionSt. Joseph

Indiana

VanderburghKentucky Lexington

LouisvilleFayettteJefferson

DetroitFlintGrand RapidsPontiac

Michigan

WarrenKansas CityMissouriSt. Louis

New Jersey NewarkNew YorkNew YorkYonkersAkronCincinnatiClevelandColumbus

Ohio

ToledoPortlandOregon

MultnomahPhiladelphiaPennsylvaniaPittsburgh

Appendix III

GAO Contacts and Staff Acknowledgments


Margaret T. Wrightson (202) 512-9110A. Carl Harris (404) 679-1900

In addition to those named above, Catherine Myrick, Lisa Moore, StuartKaufman, and Shirley Jones made key contributions to this report.

GAO Contacts

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